1. Jonathan Cantrell Winters, Brewster, Crosby and Schafer LLC 111 W. Main St. P.O. Box 700 Marion, IL 62959 Phone: 618-997-5611 Fax: 618-997-6522 Email: jcantrell@winterslaw.com April 8, 2016SIPMA Human Resource Conference

2. Background From Belgium to Galatia, Illinois U.S. Naval Academy SIU School of Law Practice of law at WBCS o Worker’s Compensation o Personal Injury o Employment Law o Municipal Law o Commercial Litigation o Estate Planning and Litigation April 8, 2016SIPMA Human Resource Conference

3. Today’s Discussion Part 1: 2011 Amendments to Illinois Workers’ Compensation Act April 8, 2016SIPMA Human Resource Conference Part 2: Pros and Cons of Light Duty Programs for Injured Workers Part 3: Anecdotes About Practicing Law in the Workers’ Compensation Arena

4. Workers’ Compensation Origins Early 1900’s – no recovery for worker injuries unless employer negligence or third party negligence (e.g. manufacturer of work equipment) April 8, 2016SIPMA Human Resource Conference Result - Bargain between labor and industry – limit benefits in exchange for no fault system and quicker compensation

5. Why was the Illinois Workers’ Compensation Act Amended in 2011? 1. Negative Publicity – Belleville News-Democrat o Numerous Carpal Tunnel Syndrome claims against IDOC from Menard Prison guards. Guards turning keys led to carpal tunnel syndrome. o State of Illinois rarely presented medical evidence to counter claims. o Arbitrators repeatedly ruled in favor of employees. April 8, 2016SIPMA Human Resource Conference 2. Illinois was a high cost workers’ compensation state for both insurers and employers.

6. Summary of Changes Enacted in 2011 1. Medical providers’ fee schedule was cut by 30 percent. April 8, 2016SIPMA Human Resource Conference 2. AMA Guide for the Evaluation of Permanent Impairment must be considered by Arbitrators when a report is submitted. 3. Recoveries for hand injuries limited. 4. Wage differential claims capped to 67 years old or five years, whichever is later. 5. IL Dept. of Insurance now required to annually report to IWCC, Governor and General Assembly numerous statistics from insurance industry relating to claims, awards, medical expenditures, etc.

7. Effect of 2011 Changes to Workers’ Compensation Act 1. Medical providers: Obvious effect - they get paid 30% less across the board. April 8, 2016SIPMA Human Resource Conference 2. Use of AMA Impairment Guides effectively leads to reduced PPD awards. 3. Automatic reduction in all hand recoveries and carpal tunnel claims. 4. Wage differential claims – lump sum settlements are clearly lower. 5. Requirement that Department of Insurance file Annual Report...

8. The Illinois Department of Insurance Contracts with the National Council on Compensation Insurance (“NCCI”), which gathers data, analyzes industry trends, and prepares objective insurance rate and loss cost recommendations.  NCCI State  Independent Bureau State  Monopolistic State April 8, 2016SIPMA Human Resource Conference

9. 2015 NCCI Report to Illinois Dept. of Insurance April 8, 2016SIPMA Human Resource Conference

10. Dept. of Insurance Report to Governor and General Assembly “A total of 339 insurance companies wrote a total of approximately $2.75 billion in workers’ compensation insurance premium [sic] in Illinois during 2014. At 339 companies, Illinois had more insurers writing workers compensation in 2014 than any other state in the country.” -Page 2 “The National Council on Compensation Insurance (NCCI) files advisory rates on behalf of workers compensation insurers in Illinois. The 2016 advisory rates remain the same as the 2015 rates at 18.1 percent lower than the 2011 advisory rate level, the year that significant workers’ compensation reform legislation was enacted.” -Page 2 April 8, 2016SIPMA Human Resource Conference

11. Dept. of Insurance 2015 Report -Page 3 *Note – Figures are not yet available for 2014 April 8, 2016SIPMA Human Resource Conference

12. Dept. of Insurance 2015 Report -Page 4 April 8, 2016SIPMA Human Resource Conference

13. IWCC FY2014 Annual Report April 8, 2016SIPMA Human Resource Conference “Workers’ compensation costs are declining. Insurers reported a 19% decrease in total benefit payments (loss costs) between 2011-2015.” -Page 1

14. Who is reaping the benefits of 2011 reforms? 1. Medical providers? Their fees were slashed by 30% across the board. April 8, 2016SIPMA Human Resource Conference 2. Injured workers? PPD reduced for all hand injuries, and use of AMA Impairment Guides has in effect reduced PPD for all injuries. The data shows insurance companies have benefitted. Are the insurance companies passing on those benefits to their insured employers? Who is left? Insurance companies and employers.

15. Case Study: West Bend Mutual Ins. Co. v. Procaccio Painting & Drywall Co., Inc., No. 13-2252 (7 th Cir. 2015) April 8, 2016SIPMA Human Resource Conference Factual Background: ICC Credit v. Schedule Modification Credit Factors used by West Bend to calculate Schedule Modification Credit: Auditors’ discovery led to Dept. of Insurance Complaint

16. West Bend Mut. Ins. Co. v. Procaccio Painting & Drywall Co. Trial court judge awarded damages of $259,933 plus $72,439.20 in prejudgment interest for policy years 2006, 2007, and 2010. April 8, 2016SIPMA Human Resource Conference IL Dept of Insurance ruled against West Bend. West Bend filed lawsuit in federal court. West Bend’s claim: oral agreement with Procaccio’s President. Law: Integration clause in West Bend’s policy means parol evidence is inadmissible. Court of Appeals: Affirmed and stated West Bend could have produced evidence of how to properly calculate Schedule Modification Credit and how they actually inflated it.

17. Sources Illinois Workers’ Compensation Act (820 ILCS 305/1 et seq.) Illinois Workers’ Compensation Commission (www.iwcc.il.gov) Illinois Insurance Code, Article XXIX (“Workers’ Compensation and Employer’s Liability Rates”); 215 ILCS 5/454 - 471 Illinois Department of Insurance (insurance.illinois.gov) National Council on Compensation Insurance (www.ncci.com) United States Court of Appeals for the Seventh Circuit (www.ca7.uscourts.gov) Questions as to 2011 Reforms to Illinois Workers’ Compensation Act? April 8, 2016SIPMA Human Resource Conference

18. Part 2: Light Duty Programs Insurance company says: “You pay workers to work, we pay less TTD, you pay less premiums.” Questions as to Light Duty Programs? April 8, 2016SIPMA Human Resource Conference Pros: 1) If the light duty work is a benefit to employer, there is a likelihood of a net gain to both the employer and the insurance company. 2) Once the worker realizes they have to continue to work, the worker may be motivated to recover from injury and return to old job. Cons: 1)Opening the door for retaliatory discharge lawsuits. 2)How does the math work?

19. Part 3: Practicing Worker’s Comp Law 2. How a small work comp claim turned into a huge jury verdict. Questions or Comments? April 8, 2016SIPMA Human Resource Conference 1. No discovery process in Illinois Workers’ Compensation Commission.